'Hurricane' of patent losses hitting Big Pharma

Conditions are deteriorating. Anyone who keeps a close eye on pharma forecasts knows that. Patent expirations are already buffeting drugmakers, and even more are on their way. In fact, as we reported last week, blockbuster drugs netting several billions in annual sales lose their patent protection this year, including Pfizer's megablockbuster Lipitor.

Drugmakers have been scrambling to prepare for the storm: Merging with big rivals to fortify themselves (Pfizer-Wyeth, Merck-Schering-Plough); buying up smaller firms in generics, emerging markets and consumer healthcare (Sanofi-Aventis and GlaxoSmithKline, for two); and slashing payrolls and cutting overall costs.

All that activity may have served as a diversion from the big picture, but analysts are now pronouncing doom and gloom, the New York Times reports. "The hurricane is making landfall," Charles Stanley Securities analyst Jeremy Batstone-Carr told the NYT. "This is panic time, this is truly panic time for the industry," said Kenneth Kaitin, director of the Center for the Study of Drug Development at Tufts University. And as the NYT notes, Morgan Stanley recently downgraded the entire European-based segment of the industry in the report An Avalanche of Risk? Downgrading to Cautious.

The good news? Some analysts see pharma's suffering shares as an opportunity to invest, saying that drug stocks are bargains because of low P/E ratios and strong dividends. But while that silver lining might please investors, it's not going to help Big Pharma refill depleted pipelines and otherwise make up for sales lost to generic rivals. 

- see the analysis in the NYT